As Europe continues to unravel, the new talking point is that apparently the markets are 'dysfunctional.' They aren't.

European finance officials are stepping up their efforts to slow the rising panic over the euro zone's debt crisis.

The European Central Bank signaled in a statement on Sunday that it was ready to begin buying Italian and Spanish government bonds...

"It carries the clear hint that the ECB is ready to purchase debt on its own book if needed, should it consider markets dysfunctional and so interfering with monetary policy transmission," Barclays analysts wrote in a note Sunday.

The first statement--that the ECB is going to start buying Italian and Spanish bonds--means that Europe is now going to start printing Euros in order to buy Italian and Spanish bonds because the private sector won't do so at an affordable interest rate.

The second statement--that the ECB is willing to print money if markets are "dysfunctional" or "interfering with monetary policy transmission"--is priceless. To start with, it's crazy wording that is awfully hard to parse--especially the part about "monetary policy transmission."

But the larger point is that the markets aren't dysfunctional. The reason why interest rates are rising for Italy and Spain is because the markets aren't very confident about their ability to repay the loans. Everyone's seen Greece, Ireland and Portugal, and the writing is increasingly on the walls for Italy and Spain. As such, it's entirely appropriate for markets to demand a higher interest for higher risk.

It's not the markets that are dysfunctional. It's unsustainable sovereign debt that's dysfunctional.